Wednesday, August 04, 2010

Quotes of the day

Better is open rebuke than hidden love. Wounds from a friend can be trusted, but an enemy multiplies kisses.--ancient teacher

... the “Next Warren Buffett” will not likely be a young stock broker from Nebraska sitting in his upstairs room reading Moody’s manuals and S&P sheets.--Jeff Matthews

Most people don't actually oppose all forms of business discrimination. A familiar example is the disproportionate number of black players in the NBA. Hardly anyone seriously believes that the owners of professional basketball teams are systematically biased against whites and Asians. The mere existence of a disparate outcome is not proof of the type of discrimination that most people oppose. So long as the "under-representation" of a particular group can be correlated with other factors—so that the person's membership in the group is not the cause of the under-representation—the outcome does not qualify as the type of discrimination that most people want to criminalize. ... In the case of a segregated restaurant in the free market, the penalty now is not on the employer but on the discriminating customers. By hypothesis, the only way the owner evades financial loss from discriminatory practices is if his customers, in turn, are willing to pay higher prices. This means that the bigoted whites in our hypothetical community are paying more for eating out (in whites-only restaurants) than their colorblind neighbors, who are happy to patronize restaurants with black employees and customers. Again, the free market doesn't prohibit people—whether as employers or consumers—from acting on their prejudices, but it does make them pay for it. ... The most shocking abuses of minorities and women in history occurred under the regimes of tyrannical governments. No matter how anti-Semitic the business leaders in a community might be, they would never have instituted the racial policies of the Nazis because those policies would have been too unprofitable. --Robert Murphy

Tsagaan Khass, by the way, means, rather incongruously, "White Swastika." I wonder if they know that Hitler was an Austrian ruling Germany? And, excuse me for sounding silly, but isn't respecting Hitler, in addition to all of its other problems, accepting foreign influence?--Tyler Cowen

After passing the Assembly, the [hedge fund] tax was quickly branded by Mayor Michael Bloomberg, editorial boards and city business leaders as an ill-advised assault on a core industry. Connecticut's governor, Jodi Rell, intentionally or not, added ammunition to their concerns by using the proposal as a recruitment tool. Ms. Rell went as far as to invite a group of managers to a waterfront restaurant in the tony suburb of Darien and regale them with informational booklets laying out exactly how much less they would pay if only they decamped to Connecticut. By that time, Albany lawmakers, along with Mr. Paterson, had soured on the idea. What they thought was a painless jolt of $50 million in revenue had become a nightmare.--Jacob Gershman

... going through the mortgage process is a reminder of one of the reasons that things went so badly wrong during the housing bubble; we are inundated with paper. There are disclosures about the Mortgage Disclosure Improvement Act telling us we have seven days to review any change in our APR; disclosures about the Home Valuation Code of Conduct, even a disclosure solemnly informing us that the bank intends to check credit scores and may not loan us money if there's a bad payment history of too much debt. I'm pretty good with paperwork, and I understand all the terms being used (not to mention the laws being referenced), and I find it impossible to keep track of it all mentally--especially when you add in the tax returns, the W-2s, the bank statments and sworn certifications that all the money being used was legitimately earned or received as gifts. In fairness, we're going through our credit union, which is apparently especially bureaucratic, but still--it's very easy to develop a sort of attentional blindness and keep signing things. I requires heroic effort to read every document. This illustrates, I think, the limits of transparency. Much of this paperwork is the product of earlier acts designed to help uninformed borrowers deal with the complexity of their loans. If you read and understand all of it, perhaps you do. But there's so much of it that it's relatively easier to overlook something.--Megan McArdle

Of course, it's possible that Canseco's outsize influence could be benign—maybe he shared with his fellow power hitters a set of batting tips that proved effective. But if this is the case, Canseco's abilities as a hitting instructor were quite unique—Gould and Kaplan looked at the effect 30 other power hitters of Canseco's era had on their teammates and found that none of them had a statistically significant influence on the hitting performance of teammates. (Some of these were in fact Canseco's original disciples, suggesting, perhaps, that not all users become proselytizers.) What's more, the Canseco effect disappears after 2003, when baseball instituted random drug testing and punishments for those found guilty. If Canseco was merely offering innocent performance-enhancing advice, it stopped working with the advent of drug testing.--Ray Fisman

Last year, the [Obama] administration grew fond of "double counting" the savings from the Medicare cuts in health care reform--claiming that they'd reduced the deficit, paid for reform, and extended the life of the Medicare trust fund. Eventually, Republicans got around to asking for an analysis from the CBO, which told us what anyone who ever took first year accounting already knew: this is not true. If you used the savings to "pay for" the new spending, you can't also say that you've used them to shore up the finances of Medicare. ... During the election, I supported Obama's candidacy in part because he seemed to be serious about producing good numbers for his programs. It's extraordinarily dismaying to see his Health and Human Services Secretary so firmly committed to making obviously misleading claims about his largest legislative achievement. --Megan McArdle

About 7,000 federal workers received Social Security Administration (SSA) disability benefits while on the government payroll during fiscal year 2008. Almost 1,500 other federal employees may have received fraudulent or improper payments between October 2006 and December 2008, according to the Government Accountability Office (GAO). The potentially improper or fraudulent payments totaled about $1.7 million each month, according to GAO estimates. The exact number and nature of the payments cannot be determined without detailed case investigations, the GAO said.--Ed O'Keefe

I blurted out: "isn't this unethical?" I was told in response, "We have plenty of former regulators on the staff," implying that what was legal was ethical. It has taken me so long (18 months) to react to the event partly because Prof. [and former Fed Governor Alan] Blinder is scholarly, gentle in manners, the kind of likable person with whom I would have an intellectual conversation on occasion. In addition, having spent the last few years immersed in the classics, a certain sense of grandeur (from which I am looking for a cure) inhibited me from the reporting of journalistic anecdotes -- Alan Blinder is certainly not the worst violation of my sense of ethics; he probably irritated me because of the prominence of his previous public position and due to the context of the Davos conversation, which was meant to save the world. But I have to transcend my human proclivities and swallow my sense of grandeur: someone used public office to, at some point, legally profit from the public.--Nassim Taleb

How many flats in China are sitting empty? The media recently floated a story -- denied by power companies -- that 64.5 million urban electricity meters registered zero consumption over a recent, six-month period. That led to a theory that China has enough empty apartments to house 200 million people.--Andy Xie

Since 1980 total tax revenue as a percent of the US economy, has risen and then fallen to its 1980 level, while marginal tax rates have fallen for both income and capital gains. Total spending, meanwhile, is at record peacetime levels as a percent of GDP. Given the various Democrats and Republicans in charge of the White House or Congress, and business cycles, the cause and effect is not obvious. But clearly 30 years later, we are spending more, and government is getting about the same total vig at lower marginal rates.--Eric Falkenstein

Nobel Prize winners Robert Solow and Paul Krugman famously once questioned whether the proliferation of computers and technology would lead to bottom-line growth. (This theme underlies the title of Krugman’s classic 1990 book “The Age of Diminished Expectations.”) In the end, policymakers must remember that whether or not the US and Europe avoid a lost decade depends on their ability to retain productive vitality in their economies, not simply on short-term demand-stimulation measures.--Kenneth Rogoff

In the northeastern United States, the winter of 1977 was particularly harsh. I remember it well because it was my second year on the faculty at the University of Rochester. Seventy miles west, in Buffalo, an elderly couple froze to death that winter because their natural gas had been cut off. The reason for the shortage: price controls. Both the fact of price controls and the couple's horrible fate made the national news. But virtually none of the reporters put the two facts together. One day in class, his professor showed how a price ceiling causes a shortage. Don [Boudreaux] grokked it immediately and said to himself, "Oh my gosh, that's why that couple in Buffalo froze." He saw the power of economics to explain the otherwise mysterious world around him. He was hooked. He later told me that those three lines--the supply curve, the demand curve, and the price ceiling--are the most important three lines in economics.--David Henderson